Underwriters are the central actors in the Factor ecosystem. They source, evaluate, verify, and onboard receivables into the protocol and assume the first-loss position for every receivable they submit. This incentive structure, unique to Factor, creates a trust-minimized environment where credit risk is properly aligned, investor protection is maximized, and yield generation remains grounded in high-quality real-world assets.

4.1 Role of Underwriters

Underwriters are specialized factoring fintechs or credit originators with expertise in evaluating creditworthiness and managing receivable portfolios. Their responsibilities include:

• Sourcing receivables from healthcare, SMB, real estate, and specialized factoring markets
• Verifying documentation and ensuring receivable authenticity
• Assessing credit quality using internal and market-based risk models
• Declaring an Expected Default Rate (EDR) for each batch of receivables
• Providing first-loss capital proportional to the declared risk
• Minting receivables into $F-NFTs with encrypted documentation
• Triggering maturity and settlement events
• Maintaining performance history, which determines future eligibility

Underwriters act as the bridge between real-world receivables and on-chain liquidity.

4.2 Expected Default Rate (EDR)

The Expected Default Rate is a quantitative risk metric that underwriters assign to each receivable pool based on: